Looking to purchase a home in Big Bear, CA? Obtaining the best mortgage rates can be daunting, especially since the lender requirements have changed over the past few years. There are fewer lenders and higher standards, due to the mortgage industry crisis.
Your credit score has the most influence, but lenders also take into consideration your debt to income ratio, equity, job history and assets and savings.
We distilled the qualifications for you:
FICO Score
Your credit score is the most influential part of your qualifications. The FICO scale runs from 300 to 850. The three major credit bureaus keep a history of all of your borrowing and payments. A score between 760 and 850 means lower mortgage rates and more loan choices. A score of 620 or lower will put you in the “subprime” category. Your loan will be at a higher interest rate with fewer types of loan choices. According to BankRate.com, a score of 500 is usually the minimum qualification.
Dept to Income Ratio
Lenders look at the “front end”, which is the total of your monthly mortgage payment, the interest, taxes and homeowners insurance. This should not exceed 28%. 32%
On the “backend”, they examine your liabilities. This includes credit card payments, insurance payments, mortgage, property taxes, student loans, alimony and child support. Most lenders look for the liabilities to be below 36% of your gross monthly income. 45%max as per fnma
Equity
Your equity is the difference between the market value of your home and what you owe. Most industry analysts say 20% or more will qualify you for a good mortgage rate. You can still get a mortgage if your equity is less than 20%, but you may be required to buy private mortgage insurance. 30% down is the industry norm to avoid .25% price add, however 20% down is most client favorable option.
Work History
Lenders are looking for stability. They want to know how long you’ve been in your current job. They usually want proof of 2 years employment in the same position. A history of repeated job changes means you’ll have a harder time obtaining the loan, unless your spouse has steady employment. If you change jobs regularly, within the same line of work, and continue to advance in income and benefits, you’ll be viewed favorably.
If the economy has caused you to be unemployed, you can still qualify, but it may be at a higher rate.
Assets and Savings
Do you have money saved for a rainy day? Lenders prefer four to six months of savings. Liquid assets such as stocks, bonds, retirement accounts and insurance policies are also acceptable, since they can easily be converted to cash. With terms of withdrawal provided by the investment company
If you don’t meet the criteria, build up your FICO score and assets before re-applying.
Purchasing a home in the Big Bear area is more than price and mortgages. We encourage you to read about the different neighborhoods Big Bear has to offer. Give us a call, we’re happy to answer your questions.
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